The IMF has also been revising its estimates of the cost of the global downturn on government budgets.

It now says that overall, the rich countries of the G20 group will suffer a budget deficit of 10.2% of economic output or gross domestic product (GDP) in 2009, the largest for most countries since World War II.

The largest projected budget deficits are in the US, with 13.5% of GDP, the UK, with 11.6%, and Japan 10.3%.

However, the UK will have the largest projected budget deficit of all G20 countries by 2010, at 13.3% of GDP, compared to 9.7% for the US.

Fiscal boost

The rising budget deficits have been caused by a combination of the severe global economic downturn, which has slashed government revenues, and the stimulus measures introduced by some governments to try and kick-start the recovery.

The IMF estimates that the G20 countries will implement stimulus plans worth 2% of their GDP in 2009, and 1.6% in 2010 - but it says it is difficult to measure how effectively these have actually been implemented.

However, it says that such plans have had a big effect on limiting the severity of the recession.

It estimates that such spending has boosted growth in G20 countries by between 1.2% and 4.7% this year.

The IMF says increased spending is more effective than cutting taxes in boosting demand, and works best when implemented in conjunction with looser monetary policy and in a coordinated fashion around the world.

Long-term damage

The IMF estimates - prepared ahead of the G20 summit of world leaders in Pittsburgh in September - also show how much long-term damage the crisis is doing to public finances.

It estimates that by 2014, government debt will reach 239% of GDP in Japan, 132% in Italy, 112% in the US, and 99.7% in the UK.

Proportionately, however, the rise in the UK is the biggest - with debt more than doubling from 44% in 2007.

Rating agencies have recently warned that a UK debt of 100% of GDP would force them to consider downgrading the credit rating of UK government bonds.

This could make it more costly for the government to raise money.

The IMF says that it is important for governments to show a credible path for reducing deficits in the long-run, although it urges them to continue the fiscal stimulus in the short-term.